Effect of FDI in Economy Inflows into India

Abstract

In recent decades, the developing countries have been receiving foreign investment in the form of foreign direct investment, portfolio investment, external commercial borrowing etc. all on private account. The developing countries also receive external assistance from the multilateral financial institutions on the government account. The foreign investment received in the form of foreign direct investment, portfolio investment etc. Constitute non debt creating capital inflow, while the external assistance, NR deposits etc. would constitute debt creating capital inflow. While portfolio investment or foreign institutional investors (FIIs) indicate investment made by foreign mutual funds in shares and debentures of the Indian companies and is thus essentially in the nature of short term capital or foot loose capital. The paper examines the changes that have taken place in terms of the industries in the Indian economy in which foreign direct investment has been made, the capital exporting countries from which it has come and other relevant issues.